Investment Column: Shaftesbury sees life on the sunny side

Sportingbet; Findel
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The Independent Online

Our view: Buy

Share price: 396p (-5.7p)

When David Cameron was extolling the virtues of the UK's tourism industry yesterday morning, he had picked an appropriate location in Hyde Park. The West End of London is a good example to hold up to the rest of the country. Just ask Shaftesbury.

The property Reit, which operates exclusively in the West End, issued an interim management statement that made only polite reference to the economic worries causing other property groups to check their growth targets. Instead, Shaftesbury was cheering the extra tourists that have been lured to London by the relatively weak pound. This, the company said, has buoyed demand for property and pushed up rents in its market in recent months.

"We are confident that the underlying strengths of the locations in which we invest and our management strategy will continue to deliver sustained out-performance in income and capital values," the company said – and this is not a hollow boast. It is backing its upbeat view with a willingness to add to the portfolio of 500 shops, restaurants and bars that it already owns, extending the £63m it has invested in the last 10 months.

This upbeat message should stand out for investors, many of whom have been subjected to plenty of woe from other companies worried about October's government spending review, which is set to take billions out of the economy. If lower economic growth undermines the pound, Shaftesbury could win.

The group's valuation also looks increasingly compelling. Several analysts upgraded their year-end net asset value forecasts yesterday, typically by about 3 per cent. The yield, estimated by Evolution Securities to be 2.9 per cent by next year, is already decent, but we would argue that there is still juice left in the shares.

Property groups, especially those that have a large exposure to retail markets, are starting to get gloomy about their prospects. Shaftesbury is positively sunny in its outlook. Buy.


Our view: Buy

Share price: 60.75p (+1p)

The World Cup was disappointing for English football fans, but there was a silver lining for anyone with money in Sportingbet. The online gaming group attracted more than £50m worth of bets during the competition, and because a number of fixtures went against the favourites, its profits held up well. The boost underpinned trading over the three months to the end of July, boding well for full-year results.

Now, you'd think that this strength would have been at least partly factored in to the share price. After all, the games ended some time ago, the data on the fixtures is publicly available and we've already heard of the beneficial impact of the tournament from others in the industry. Well, you'd think wrong, as Sportingbet is down more than 10 per cent since the beginning of May.

The stock trades on a multiple below 10 times forecast earnings for this year, according to Collins Stewart. At the same time, it offers a prospective yield of over 2 per cent; that figure rises to nearly 3 per cent on the broker's estimates for 2012. To lose out on the World Cup may be regarded as a misfortune; given the numbers above, to miss out on investing in Sportingbet would look like carelessness. Buy.


Our view: Sell

Share price: 6.6p (-0.2p)

Findel, the ailing home-shopping and educational supplies business, kicked off a review of its business last month after reporting losses of £76.1m for the financial year, which it euphemistically described as a "challenging" period.

The review is still in train but the company said yesterday it has sold its struggling businesses, online gift retailer I Want One of Those and the wedding specialist website Confetti for £600,000. The paltry amount will hardly make any dent in Findel's bulging net debt of £309.6m.

Such a mountain of debt on revenues of just £547m last year is a key reason why Findel is now a penny share, a precipitous fall from August 2009, when its stock was nearly 50p.

Furthermore, none of Findel's three core divisions managed to increase profits last year, although this was partly because the company tightened its credit criteria for home-shopping customers.

David Sugden, the chairman who joined in April, may be able to pull some rabbits out of the hat with his review, and Findel does have profitable businesses, including Kitbag and Kleeneze. But we don't think it's out of the woods yet. Sell.